Federal Home Loan Bank Advances and Commercial Bank Portfolio Composition

FRB of Atlanta Working Paper No. 2007-17

FEDS Working Paper No. 2007-31

56 Pages Posted: 1 Aug 2007

See all articles by W. Scott Frame

W. Scott Frame

Federal Reserve Bank of Atlanta

Diana Hancock

Federal Reserve Board - Division of Research and Statistics

S. Wayne Passmore

Board of Governors of the Federal Reserve - Household and Real Estate Finance Section

Date Written: August 2007

Abstract

This paper considers the role of Federal Home Loan Bank (FHLB) advances in stabilizing their commercial bank members' residential mortgage lending activities. Our theoretical model shows that using mortgage-related membership criteria or requiring mortgage-related collateral does not ensure that FHLB advances will be put to use for stabilizing members' financing of housing. Using panel vector autoregression (VAR) techniques, we estimate recent dynamic responses of U.S. bank portfolios to FHLB advance shocks, bank lending shocks, and macroeconomic shocks. Our empirical findings suggest that FHLB advances are just as likely to fund other types of bank credit as to fund single-family mortgages.

Keywords: advances, government-sponsored enterprises, GSE, portfolio shocks, panel VAR

JEL Classification: G21, G18, G38

Suggested Citation

Frame, W. Scott and Hancock, Diana and Passmore, Stuart Wayne, Federal Home Loan Bank Advances and Commercial Bank Portfolio Composition (August 2007). FRB of Atlanta Working Paper No. 2007-17; FEDS Working Paper No. 2007-31. Available at SSRN: https://ssrn.com/abstract=1004143 or http://dx.doi.org/10.2139/ssrn.1004143

W. Scott Frame (Contact Author)

Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street, NE
Atlanta, GA 30309-4470
United States
404 498 8783 (Phone)
404 498 8810 (Fax)

Diana Hancock

Federal Reserve Board - Division of Research and Statistics ( email )

20th & C. St., N.W.
Washington, DC 20551
United States
202-452-3019 (Phone)
202-452-5295 (Fax)

Stuart Wayne Passmore

Board of Governors of the Federal Reserve - Household and Real Estate Finance Section ( email )

Washington, DC 20551
United States
202-452-6432 (Phone)
202-452-3819 (Fax)

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